Solving 3 Mysteries From the Most Secretive Energy Play

The U.S. boom in shale gas and oil has come from certain parts of the country, and each of those parts is already starting to develop a reputation. The Bakken is considered the place to be if all you want is oil, the Marcellus has become the new hub for gas production, and the Eagle Ford is for those who want it all, and fast. One of these new plays is still shrouded in mystery: the Utica formation. With the Ohio Department of Natural Resources publishing data only once a year, companies can operate there while many people don't know what's going on.

Last week, that coveted report from the Ohio DNR was made public, and it helped to answer a lot of questions that many investors may have had. Let's look at three pressing questions for the Utica formation and see whether we can start to solve this shale puzzle.

1. What other formation is this most comparable with: Bakken, Eagle Ford, Marcellus?Many exploration companies and investors were hoping that the Utica would be a much more oil-rich play than its neighbor the Marcellus. It appears, though, that this isn't the case. Reports from several companies that explored for oil in the Utica found that the oil part of the play didn't have enough underground pressure to get the oil to the surface without some more advanced techniques. A couple of companies are taking a stab at the oil region of the play. Halcon Resources is one of those companies and has plans to spend about $200 million on wells in the Utica, most of which will focus on the oil play in northern Ohio. The company expects to release results on these wells in the third quarter, which should give us a clearer picture of the oil window.

At the same time, though, the Utica is not a dry gas-heavy play, either. Chesapeake Energy and Gulfport Energy , two of the most prominent companies in the Utica, seem to have focused in on the wet-gas part of the play.

Source: Halcon Resources investor presentation.

The wet-gas section has a heavy concentration of natural gas liquids (NGLs), such as propane and ethane, and condensate, a liquid that is kind of a hybrid between crude oil and natural gas liquids. Gulfport has reported that its first 14 wells in the wet gas "fairway" average about 807 barrels per day condensate, 946 bpd NGLs, and 7.8 million cubic feet of natural gas, making for a 68% liquids mix. While NGLs and condensate are not as well known to the general public, they have a much greater value than dry natural gas because they can be used in a variety of things such as chemical manufacturing feedstock and a blending agent for heavy crude oil such as Canadian tar sands. This makes wet gas much more financially lucrative than dry gas and hence why companies are targeting this region.

2. Were the Utica's 2012 production numbers as great as we had hoped they would be?If I were to tell you that 2012 oil and gas production in the Utica jumped 93% and 80%, respectively, you might think that's pretty impressive. But let's put that number in context. In 2011, the Utica had only two wells producing, and today there are about 107. So when you consider that the number of total producing wells has jumped 50 times but production gains have less than doubled, it's not as great as we had hoped.

If you're invested in Utica players, I wouldn't go running for the hills just yet because production is being held back. Chesapeake recently reported that only 66 wells are producing, but another 86 are awaiting pipeline connections and 97 more have been drilled and are in the process of being completed. The company hopes to meet a target of 330 million cubic feet equivalent by year end.

3. Why are producers holding back production?Shale drilling is a rather recent phenomenon in the U.S., and the Utica is one of the most recent plays to be explored. This means that the necessary infrastructure and takeaway capacity just aren't in place to handle significant jumps in production from the region. So for now, producers are in a bit of a holding pattern.

Since wet gas is so important to the Utica's future, there are three major projects that Utica E&P companies will be following very closely. Enterprise Products Partners' ATEX pipeline, Enbridge's reversal and expansion of the Southern Lights pipeline, and Marathon Petroleum's $300 million plan to add 60,000 bpd of condensate refining capacity to two of its refineries in the Ohio valley.

The ATEX pipeline will be an NGL pipeline from the Utica/Marcellus to the Gulf Coast, where a majority of the United States' chemical refining capacity is located. The company just started open season where producers request space. Enbridge is planning to reverse the flow of the Alberta Clipper pipeline to go from the Midwest to Northern Alberta, where Utica condensate can be used as a blending component for Canadian heavy oils. For condensate to be shipped via pipeline, though, it needs to be stabilized. That's a fancy way of saying that it needs to be refined to reduce wear and tear on pipelines. It will take more wellhead investments for E&P companies, but with condensate trading at a $14 premium to WTI in Canada, it will be money well spent.

What a Fool believesUnless Ohio's Department of Natural Resources drastically changes its methods of reporting or companies publish more data regarding the Utica, it appears that we'll get to look at the overall health of this play only about once a year. Luckily, there are other ways to evaluate the health of the region. Just look at the takeaway capacity being built in the region. Once these projects start to come online, production in the Utica will take off.

Whenever there has been a bottleneck in the supply of natural gas and NGLs, Enterprise Products Partners seems to be the one swooping in to take advantage of the situation. The ATEX pipeline is just one example of a long list of projects that will make Enterprise Products Partners one of the clear winners in the US energy boom. To help investors decide whether EPD is a buy or a sell today, click here now to check out The Motley Fool's brand-new premium research report on the company.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him on Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter @TylerCroweFool. The Motley Fool recommends Enterprise Products Partners and has the following options on Chesapeake Energy: long Jan. 2014 $20 calls, long Jan. 2014 $30 calls , and short Jan. 2014 $15 puts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.